The average 401(k) account balance posted an increase for the fourth year in a row in 2006, but the cash totals in those accounts are still too low to provide a decent retirement for many workers.

Still, the annual report on 401(k) plan activity released last week by the Employee Benefit Research Institute and the Investment Company Institute suggests that plan participants are becoming savvier investors.

For workers who have participated in a company’s plan consistently at least since 1999, the average account balance rose 17 percent, to $121,202 in 2006 from $103,952 in 2005.

“The discipline of saving through a 401(k) plan continued to pay off for these 401(k) plan participants,” said Jack VanDerhei, co-author of the report and an EBRI fellow.

Average balances get bigger as workers get older: Employees in their 60s had an average account balance of $157,727 in 2006, up 9.3 percent from $144,269 in 2005, while those in their 20s ended the year with an average balance of $28,248, up 27 percent from $22,236.

VanDerhei cautioned against reading too much into the information on account balances, since the data, provided by record keepers, show only what workers have accumulated at their current job and not assets they may have rolled over into IRAs or left with previous employers.

When asked whether workers were saving enough, VanDerhei cited a study that he and Sarah Holden of ICI conducted in 2002 that showed 401(k) accumulations would replace one-half to two-thirds of workers’ pre-retirement income. The automatic enrollment encouraged by last year’s Pension Protection Act could improve those results, VanDerhei said.

The Center for Retirement Research at Boston College released a somewhat bleaker analysis last week that indicated 43 percent of households will not have enough income in retirement to maintain their standards of income.

VanDerhei noted that the Center for Retirement Research analysis looked at all households, many of which do not have access to a 401(k) plan, while the EBRI/ICI report only covers 401(k) plan participants. “That emphasizes the importance of getting people into 401(k) plans,” he said.

According to the EBRI/ICI report, about two-thirds of 401(k) assets are invested in stocks and about a third in fixed-income instruments like stable-value, bond and money-market funds, a breakdown that has changed little over the past 11 years.

The data show, though, that participants are moving away from putting too much money in company stock. Allocations to company stock declined two percentage points in 2006, to 11 percent. Assets invested in company stock have been falling since 1999, after peaking at 18.6 percent in 1998.

The EBRI/ICI data also show that plan participants are making more use of balanced funds, which include stocks and bonds, a category that encompasses lifestyle and lifecycle funds. Such balanced funds held 24 percent of the account balances of recently hired participants in their 20s at the end of 2006, compared with 19 percent in 2005 and 7 percent in 1998.

The EBRI/ICI analysis is based on data on almost 54,000 401(k) plans with 20 million participants and $1.2 trillion in assets, about 46 percent of the total $2.7 trillion held in such plans.